The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Greenyield Berhad (KLSE:GREENYB). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
View our latest analysis for Greenyield Berhad
How Fast Is Greenyield Berhad Growing?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Greenyield Berhad's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 54%. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Unfortunately, revenue is down and so are margins. That will not make it easy to grow profits, to say the least.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
Greenyield Berhad isn't a huge company, given its market capitalisation of RM108m. That makes it extra important to check on its balance sheet strength.
Are Greenyield Berhad Insiders Aligned With All Shareholders?
Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So we're pleased to report that Greenyield Berhad insiders own a meaningful share of the business. Owning 38% of the company, insiders have plenty riding on the performance of the the share price. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. Of course, Greenyield Berhad is a very small company, with a market cap of only RM108m. So despite a large proportional holding, insiders only have RM42m worth of stock. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.